On May 29, 2014 a federal judge denied the parties’ joint motion for preliminary approval of a Fair Labor Standards Act settlement in the third of a trio of wage-and-hour cases against Aeropostale: “state-law overtime and wage-and-hour claims were filed in Sankey, the state-law vacation, rest-period, and waiting-time claims were filed in Pakaz, and the FLSA overtime claims were filed here (Daniels).” In each of these cases the plaintiffs are represented by Joseph R. Becerra from the Law Office of Joseph R. Becerra and Torey Joseph Favarote from Gleason & Favarote, LLP, and all involve similar complaints.
The judge was harshly critical in his order, concluding that the settlement “is so unfair, it cannot be fixed.” One problem he found with the proposed settlement is that, by prosecuting three similar cases against the same defendant, with three overlapping lists of opt-in plaintiffs, plaintiffs’ counsel have created conflicts of interest. The court notes that “the Supreme Court has warned of the problems with an attorney who currently represents another class against the same defendant…because defendants have an incentive to settle all claims at once, if it settles at all, thereby creating opportunities for counsel to manipulate the allocation of settlement dollars to the detriment of absent class members. Here the same plaintiff’s counsel settled all three actions within months.”
Second, the settlement would have distributed only $8,645.61 among 594 collective-action members, Worse, according to the distribution formula, a large majority of collective action opt-in members would sign away their rights to sue in exchange for nothing. “The collective-action opt ins,” the Court explained, “would be better off simply walking away from this lawsuit with their rights to sue still intact.” Further, he continued, the plaintiffs making almost no attempt to argue that this settlement would be fair.
The judge next criticized the fact that the proposed agreement contains an extremely broad release clause that would insulate “‘defendants…the Released Parties, Representative Plaintiff, other Settlement Collective Action Members, Collective Action Counsel, Defendants’ Counsel, [and] the Claims Administrator’ from ‘any claim …based on distributions or payments made in accordance with this Settlement Agreement.” This, the Court concluded, “takes the cake. Not only would most opt ins receive nothing at all, or in some cases, virtually nothing at all, but absent opt ins could not go after their counsel for malpractice in foisting this deal upon them.”
The Court finally criticizes plaintiffs’ counsel for submitting a fourteen-page notice of settlement, to be sent to all potential opt in plaintiffs, along with a one-page objection form, “all chock-full of legalese,” devoid of any clear explanation of the salient points, and in a form that was sure to be “oppressive to the average person.” In the notice, plaintiffs’ counsel also carefully avoid mentioning the fact that nearly all plaintiffs would receive “nothing or virtually nothing” in the settlement.